The United Kingdom has a debt problem. Fitch Ratings affirmed the country’s Long-Term Foreign-Currency Issuer Default Rating at ‘AA-‘ with a Stable Outlook, but the underlying message was far less reassuring: the UK’s limited fiscal space will prevent any meaningful policy easing for the foreseeable future.
General government debt is projected to hit 103.8% of GDP in 2026 and climb further to 104.7% in 2027.
A budget that barely moved the needle
The 2025 Autumn Budget created fiscal headroom of just 0.6% of GDP above the government’s own deficit rules.
Even that narrow margin is fragile. Fitch noted that tax-to-GDP ratios are expected to reach historically high levels, which effectively closes the door on raising significant new revenue. The government made election pledges in 2024 that further constrain its ability to hike taxes on households. Fitch specifically flagged that any attempt to sharply loosen fiscal policy could trigger a rise in gilt yields, making borrowing even more expensive.
